Traders Are Seeing Upside for Surprising ETFs

The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, has shed more than 10% of its value in just the past month, but that has not prevented the exchange traded fund from being one the fourth quarter’s top asset-gathering ETFs.

The Organization of Petroleum Countries has kept up production to pressure high-cost rivals, such as the developing U.S. shale oil producers. The International Energy Agency expects it will take several years before OPEC can effectively price out high-cost producers. [Oil ETFs Face World-Record Supply Glut]

In the face of the rising global supply glut, investors can utilize a number of inverse or bearish ETF options to hedge against further declining energy prices. For instance, the United States Short Oil (NYSEArca: DNO) tracks the opposite moves of the West Texas Intermediate crude oil futures, and the DB Crude Oil Short ETN (NYSEArca: SZO) also tracks the simple inverse of oil. [Leveraged ETFs Are Popular Plays Among Swing Traders]

“The share count of the biggest exchange-traded fund that tracks oil prices climbed in the past 10 sessions to 241.4 million yesterday, the highest level since the fund’s inception in 2006. Shares outstanding increased by 27 percent since Nov. 5. Investors have poured in $717.8 million into the fund so far this month, after adding $283 million in October,” according to Bloomberg.

The International Energy Agency said the “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia. Nevertheless, the IEA believes supplies outside of OPEC will dip next year by the most since 1992 as cheap crude helps price out costlier producers, such as the U.S. shale oil industry.